By IPS Correspondents
QUITO, Aug 19 2005 (IPS)

Ecuador’s new defence minister warned Friday that troops in the northeastern provinces of Sucumbíos and Orellana, where protests and a strike have brought the oil industry to a halt, had been given permission to use “maximum force” to protect strategic installations.

The strike in the two Amazon provinces, which has stretched on for five days, shows no signs of being called off, even though the government demands that it be lifted before it will engage in negotiations.

The “bi-provincial civic assembly”, which groups governors, mayors, social organisations and trade unions from the two provinces, has refused to end the strike and demonstrations.

Economic activity in the provinces has been brought to a halt by roadblocks and the occupation of airports, oil camps and public offices by the demonstrators.

The protests forced the state-run oil company Petroecuador to stop production of crude. Oil exports, the country’s main source of foreign exchange, finance between 35 and 40 percent of the state budget.

“Ecuador’s crude oil, which is mainly pumped in the Amazon, has brought the country 60 billion dollars over the past 35 years. But between 1993 and 2005, local governments in the Amazon jungle region received 569 million dollars – a tiny amount compared to 60 billion,” said Orellana Governor Guadalupe Llori.

Petroecuador reported that oil production has fallen to 10,500 barrels a day – 190,600 barrels below the company’s average output of 201,200 barrels a day.

The state oil firm warned that it would take one or two months to return to normal production levels, and that investment would be needed towards that end.

The government of Alfredo Palacio declared a state of emergency Wednesday. The armed forces and police were called out in the two provinces, but despite the use of tear gas and arrests of demonstrators, the protesters did not disperse.

On Friday, Palacio asked former Defence Minister Solon Espinosa to hand in his resignation for having mishandled the crisis, thus triggering the oil industry stoppage. He appointed retired army general Osvaldo Jarrin in his place.

Just hours after assuming his new post, Jarrin warned that troops had been authorised to open fire in self-defence when protecting “strategic installations” from protesters who tried to “destroy or sabotage them.”

The striking workers and other protesters are demanding that the government cancel the oil contract with U.S. oil giant Occidental Petroleum.

They also want the other foreign oil companies operating in Ecuador – which include EnCana from Canada, Sipec from Chile, the British-French Perenco, Petrosud of Argentina and Brazil’s Petrobras – to employ local workers and companies for services and infrastructure works, build 200 km of highways, and respect the environment.

In addition, they are demanding that at least 50 percent of oil revenues go into state coffers.

Ecuador is South America’s fifth largest oil producer and the region’s second-largest supplier of oil to the United States, after Venezuela.

“Orellana and Sucumbíos are defending national sovereignty, because it does not seem fair to us that Oxy-EnCana keeps 84 percent of the revenues and leaves the country just 16 percent,” said Sucumbíos Governor Guillermo Muñoz, the chairman of the strike committee.

Among those who have demanded that Occidental Petroleum (Oxy) pull out of Ecuador are Attorney General José María Borja and former presidents of Petroecuador Hugo Bonilla and Carlos Pareja.

They argue that the company has broken a number of local laws and statutes, such as transferring rights and obligations under the oil contract to the Canadian firm EnCana without authorisation from the Ministry of Energy and Mines, and failing to make the promised investments.

In addition, the company has been fined six times for failing to respect production caps set by national authorities, and it did not notify the authorities when starting to drill new oil wells, as required by law.

The Expreso newspaper in Guayaquil, Ecuador’s economic capital, reported that the government is apparently negotiating conditions with Occidental Petroleum, such as a greater share of oil revenues for the state.

Mayor Máximo Abad of Lago Agrio, the capital of Sucumbíos, was arrested, and warrants were put out for the arrest of several other local officials in the two provinces.

The unrest was aggravated by Abad’s arrest, and the protesters complained that the government is not interested in dialogue.

Economy Minister Magdalena Barreiro said the oil strike has caused 570 million dollars in losses in Sucumbíos and Orellana, and announced that the government had asked Venezuela for a loan of crude oil to keep up exports.

Petroecuador suspended its exports on Thursday because of events beyond its control.

Governors Llori and Muñoz cited official statistics to demonstrate that their provinces have been neglected, and to argue the justice of their demands.

They pointed out that 42 percent of children under six in the two Amazon provinces suffer from chronic malnutrition, and that nearly 87 percent of the population of Orellana and 82 percent of the population of Sucumbíos live in poverty.

Nor has the oil industry been a great source of jobs in the provinces, employing just over three percent of the economically active population.

“And as if that were not enough, a medical study carried out between 1985 and 1998 by Dr. Miguel San Sebastián, with the ‘Manuel Amunárriz’ Institute of Epidemiology and Community Health, found high rates of cancer” among people living in oil-producing areas, said Llori.

The social upheaval is the worst faced by Palacio since he became president after nationwide demonstrations forced his predecessor, Lucio Gutierrez, out of office in April. Gutierrez was the third Ecuadorian president ousted since 1996.

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